AUD/USD Technical Analysis: Rebound Rejected at Channel Top

AUD/USD Technical Strategy: Flat

• Australian Dollar rejected lower at two-month channel resistance
• Break of counter-trend line needed to confirm bearish resumption
• Tactical long trade unattractive absent a clear-cut bullish signal

The Australian Dollar recoiled from channel resistance guiding it lower since mid-February, with confirmation of down trend resumption all but secure. Still, the near-term series of higher highs and lows remains intact, arguing against assuming follow-on weakness for the time being.

A daily close below trend line support – now at 0.7709 – opens the door to challenge the pivotal 0.7625-53 cluster (38.2% Fibonacci expansion, March 29 low, two-year trend line). Alternatively, push above the 0.7813-31 zone (April 19 high, 38.2% Fib retracement) exposes the 50% barrier at 0.7889.

Prices are sitting squarely at immediate chart support, making a short position appear unattractive from a risk/reward perspective. On the other hand, the path of least resistance continues to point downward and absent signs of bottoming warn against taking up the long side, even tactically. Staying flat seems most prudent.

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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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